A researcher for Journal Graphics, the company that provides transcripts of ABC broadcasts, is fiddling with her computer. She can't find a copy of ABC's "Day One" show on the tobacco industry that prompted cigarette giant Philip Morris to file a $10 billion libel lawsuit a month after it aired.

I give her the February 28, 1994, broadcast date and the names of "Day One" producer Walt Bogdanich and correspondent John Martin. I tell her the award-winning broadcast is titled "Smoke Screen." At last, the computer provides an explanation: "This segment on smoking is no longer available for sale at ABC's request."

ABC, wallowing in ignominy after publicly apologizing to Philip Morris for a mistake in the broadcast, wishes the whole matter would fade away. The network wants to move on; that's why it settled in late August and why it won't provide transcripts of the controversial show, says an ABC spokeswoman.

If there is a loser in the public eye in the extraordinary Philip Morris-ABC settlement, it is clearly ABC. But it didn't have to be.

The thrust of the ABC piece was that the tobacco industry is able, through the manufacturing process, to control the amount of nicotine in cigarettes. Tobacco companies don't dispute that nicotine is removed with other tobacco compounds and later put back in. While this was common knowledge in the industry, it was news to officials and consumers alike before the "Day One" broadcast.

If ABC had developed clearly and simply the crux of its story – that cigarette companies remove nicotine in manufacturing reconstituted tobacco, then put some of it back before cigarettes are sold to smokers – it would have produced a powerful piece of journalism. It means tobacco companies are putting nicotine back that doesn't have to be there. This is especially significant because nicotine is an addictive drug, and it is well established that smoking can cause lung cancer.

This information has paved the way for the federal government to regulate tobacco as a drug, as it does other products with nicotine, a development as deeply feared by tobacco interests as it is dear to the hearts of antismoking activists.

Unfortunately, the cigarette segment was flawed. The network overhyped the story, a not uncommon occurrence in the competitive world of TV newsmagazines. More serious, rather than carefully outlining how companies manipulate nicotine content in making reconstituted tobacco for cigarettes, it left the distinct impression that tobacco companies add extra nicotine beyond what is found in tobacco naturally, without establishing that they do.

ABC wound up apologizing for reporting that Philip Morris adds "significant amounts of nicotine from outside sources" – essentially apologizing for something it never stated.

"ABC, while doing some excellent reporting, did some things that were definitely misleading," says Legal Times reporter Benjamin Wittes, who wrote about the case. "They were trying to cram a 100-inch complicated story into 20 minutes."

Yet the story's dominant theme had a powerful effect. Many, including Philip Morris attorneys, believe the smoking segment played an important role in fueling the federal government's drive – for the first time – to regulate tobacco products as drugs because of nicotine manipulation.

"Smoke Screen" won the prestigiousGeorge F. Polk award. After the settlement, the Polk committee re-examined its choice and concluded the program's errors hardly overshadowed the validity of its theme. The award stands.

As part of the settlement, both sides agreed not to talk publicly. But Philip Morris just couldn't keep quiet. It bought approximately 700 full page ads, crowing in major publications, "Apology accepted." (Philip Morris takes the position that the ads are consistent with the terms of the settlement.) ABC, on the other hand, refers mantra-like to its one-page apology rather than comment.

ABC has forbidden Bogdanich and Martin – who refused to sign the apology – to defend themselves publicly. The press, finding itself writing settlement stories with little help from ABC and at the mercy of Philip Morris' masterful media campaign, has contributed to the image of ABC as a shameful loser. What ABC apologized for isn't nearly as widely understood as the mere fact that the network apologized.

"What you've seen is a classic example of the way the tobacco industry succeeds," says tobacco foe Clifford Douglas. "ABC issued this crazy, ambiguous statement and muzzled itself so that nobody at ABC could say anything. Philip Morris meanwhile goes off and literally starts doing a propaganda campaign around the world."

Some say ABC, concerned about the upcoming sale to Walt Disney Co., wanted to clear the books and settled the libel suit in the same way one pays rather than fights an unjust parking ticket. Others contend some of ABC's editing and reporting techniques were the network's downfall – and that a jury might have seized on contradictory testimony and potentially embarrassing ABC documents and sided with Philip Morris.

But in the end, there was no trial. The apology gleefully trumpeted by Philip Morris and ABC's decision to pay a reported $15 million in legal fees are what is likely to be remembered about the "Day One" broadcast.

"I think it's very important for reporters to separate out what the reality is here," says Sandra Baron, executive director of the Libel Defense Resource Center. "ABC didn't apologize for very much. All you have to do is read the apology and it suggests that it still was a very powerful broadcast."

But it was a powerful broadcast with just enough problems to allow an aggressive, beleaguered foe to administer a humbling, expensive public relations drubbing to the nation's number one network news operation.

Walt Bogdanich, 44, has been an investigative reporter for two decades. While at the Wall Street Journal, he won a Pulitzer Prize in 1988 for exposing shoddy practices in medical laboratories. In the fall of 1992, he joined ABC as a producer for a new TV magazine show that eventually became "Day One."

Bogdanich has told friends he woke up one morning and decided to explore the tobacco industry. Why, he wondered, when it's established in the public's mind that cigarettes are dangerous, do tobacco companies still thrive? He turned his attention toward cigarettes, producing a handful of stories on the products and on the companies that make them.

His first story, on the health dangers of working in tobacco fields, aired in November 1993. He did another on the financial links between tobacco companies and minority cultural and arts groups, which have a tough time raising money and often appeal to tobacco firms.

But it was Bogdanich and Martin's story in February 1994 that, despite intense scrutiny by ABC lawyers, sent the network into litigation hell. Seventeen grueling, deposition-filled months elapsed between the filing of the suit and the controversial denouement.

Here's how the story developed:

Douglas, an attorney who's been battling the tobacco industry for years, says Bogdanich called him looking for story ideas. Douglas suggested a story on how tobacco companies remove nicotine during the cigarette manufacturing process and spray it back in, in Douglas' view as a way to keep smokers hooked. (Tobacco companies say they do it for flavor.)

Bogdanich jumped.

Many people think cigarettes are no more than bushy tobacco leaves ground up and rolled in white paper. But since the 1960s, in an effort to reduce costs, tobacco companies have used reconstituted tobacco in both premium and generic brands. Reconstituted tobacco – made from the stalks, stems and other parts of the tobacco plant – accounts for less than half the tobacco in currently marketed brands, according to "Day One."

In the reconstitution process, stalks and stems are mixed with warm water and squeezed into a mushy consistency. The mixture is sent through a press and every compound in tobacco that is water soluble, including nicotine, comes out. The tobacco extract, including the nicotine, is then reapplied to give the reconstituted tobacco flavor and maintain the natural nicotine level, according to Philip Morris.

But Philip Morris has stated that only the nicotine and flavoring compounds originally removed go back in. No "extra" nicotine is added. In fact, says Philip Morris, less nicotine goes back in than comes out. Reconstituted tobacco contains about 75 percent of the nicotine naturally found in tobacco, according to a lawyer for the company.

Rather than report the story in a straightforward manner, "Day One" hyped its findings and loudly tooted its own horn: This was an investigation that "could change the tobacco industry forever"; the show's journalists have "uncovered perhaps the tobacco industry's last best secret: how it artificially adds nicotine to cigarettes to keep people smoking and boost profits."

Other inflammatory rhetoric, such as, "something the tobacco companies don't want you to know," and "never before been disclosed," contributed to the sensationalism.

The hype is necessary to grab viewers and boost ratings, say critics and those familiar with TV newsmagazines. "Prime time newsmagazine shows are ratings-driven," says Martin Koughan, who has made documentaries for the magazines and has worked for CBS and CNN. "The subjects are chosen based on whether they can get ratings... You are so tempted to push more drama into a story than you should. 'Day One' fell victim to that."

Although ABC never said explicitly that cigarettes with reconstituted tobacco have a higher nicotine content than what's normally found in nature, that's what the program implied to the average viewer.

The broadcast also went to great lengths to explain that nicotine is an addictive drug and questioned why cigarettes aren't regulated. Although the Food and Drug Administration regulates nicotine patches and nicotine gum, it has never regulated tobacco because of the historically accepted notion that the nicotine appears naturally in tobacco.

If the broadcast had just reported on the reconstitution process, many familiar with the case say there would have been no libel suit. But when Martin asked an R.J. Reynolds scientist why the company was "spiking" its cigarettes with nicotine, the situation got dicier.

"If ABC wrote a story that tobacco companies want to maintain a certain level of nicotine, you would not have had a lawsuit," says Alan Cooper, who covered the legal battle for the Richmond Times-Dispatch. "When they say the tobacco companies spike cigarettes to addict people and really couldn't prove it, then there was a lawsuit."

Nicotine can be added in two ways in the reconstitution process. Besides the process already described, which "Day One" glossed over, there's a second method tobacco companies can use. It involves obtaining nicotine flavor extracts from outside suppliers and spraying them onto reconstituted tobacco.

The following passages from the "Day One" broadcast caused ABC problems:

"Even though reconstituted tobacco allows the companies to produce cigarettes more cheaply, there are problems: poor taste and less nicotine. So here's what they do in step two. They apply a powerful tobacco extract containing nicotine and flavor to the reconstituted tobacco. This process, too, is meant to be a secret. Of the five companies we contacted who supply the extract, only one would talk to us on camera."

About 10 minutes into the broadcast, Martin, detailing step two, focuses specifically on Philip Morris. It's only one of three times the company is mentioned in the 18-minute broadcast, which mainly focuses on R.J. Reynolds. (Reynolds also sued ABC and settled when Philip Morris did.) Martin tells viewers: "There is another way nicotine is added to cigarettes and it begins, perhaps surprisingly, at docks like this one in Newark, New Jersey. It is here that nearly pure nicotine is brought ashore to be combined with alcohol. It is called denaturing. The mixture can then be applied to tobacco during the manufacturing process for, among other things, flavoring."

Big trucks are shown leaving Newark and then trucking records are flashed onto the screen indicating Philip Morris "received thousands of gallons of this alcohol mixture during the 1980s. The cigarette makers say this mixture leaves only a tiny amount of nicotine on the tobacco."

The broadcast, with dramatic footage of the big trucks and trucking records, clearly implies that Philip Morris and other tobacco companies are still doing this, although Martin did say in the broadcast the records were from the 1980s.

In a court document, Philip Morris said it had previously used outside tobacco extracts in one domestic brand, Merit, but hadn't used them in any domestic brands since December 31, 1993. The "Day One" segment aired two months later.

But the biggest problem was ABC's use of the word "spiking." Although it was used only once, it came to symbolize the broadcast, with each side claiming it meant something different.

In one of the opening teasers, Martin poses this question to an R.J. Reynolds scientist: "Why are you artificially spiking your cigarettes with nicotine?" The scientist replies: "We are not, um, in any way doing that."

Spiking, as in "spiking the punch," can be interpreted to mean adding something that isn't naturally there. According to Philip Morris documents, the firm took the position that "spiking" meant that tobacco companies add extra nicotine beyond what is naturally in tobacco.

"I can't imagine Philip Morris would have sued if it weren't for the use of the word spiking," says an attorney for thetobacco company who didn't want to be identified. "It was the allegation of spiking. The company took the position that it meant adding extra nicotine."

But ABC never made that specific allegation. To ABC, spiking meant putting back the nicotine in the reconstitution process,according to documents. Spiking, to ABC, is a side issue. The real issue, in its view, is why Philip Morris and other tobacco companies put nicotine back in at all.

"Although Philip Morris has sued because it says spiking is the wrong word to describe what it admittedly does," says one ABC document, "the key issues ABC's news programs addressed were why tobacco companies in fact do this and the potential regulatory consequences of this conduct."

When ABC settled, the network issued a press release apologizing to Philip Morris for its "mistake." Diane Sawyer reported on it on ABC's evening news on August 21, and the statement was read during "Monday Night Football" and again on "Day One" later in the week.

"We now agree that we should not have reported that Philip Morris adds significant amounts of nicotine from outside sources," the statement said. "That was a mistake that was not deliberate on the part of ABC, but for which we accept responsibility and which requires correction. We apologize to our audience and Philip Morris."

Despite the wording of the apology, the "Day One" report never specifically stated that Philip Morris adds significant amounts of nicotine from outside sources. But reporter Alison Frankel, who wrote a long, thoroughly researched piece on the lawsuit for American Lawyer magazine, says, "The impression you took away from the ABC piece and the impression that the hype surrounding the piece and the world at large took away, was that tobacco companies had a secret process that resulted in products with higher nicotine levels than they would otherwise have."

After watching the broadcast a dozen times, it's clear to me, as ABC states in its apology, "that the principal focus of the reports was whether cigarette companies use the reconstituted tobacco process to control the levels of nicotine in cigarettes in order to keep people smoking."

In ABC's opinion, according to documents and published reports, where the nicotine comes from – the reconstitution process or outside sources – is irrelevant.

"It doesn't matter where the nicotine comes from, if they made it and put it on or bought it and put it on," ABC outside counsel Roger Witten told American Lawyer. "There's nicotine in there that doesn't need to be."

"The question is, does Philip Morris boost the nicotine levels, not where it comes from," says Pete Slover, a lawyer who is a reporter for the Dallas Morning News. "This is what many people think. But ABC may have done itself in by not being on solid ground. Just shows how airtight an investigative piece has to be. One tiny flaw and the opposition can take it, and it will blow up in your face."

According to the Wall Street Journal, some network lawyers concluded documents received in the discovery process didn't contain enough to back up the "Day One" account of nicotine extract coming from outside the company.

However, ABC's outside attorneys didn't think there were serious flaws, according to the New York Times, which reported that the lawyers believed they had a 65 percent chance of winning at trial. But those odds weren't good enough for Capital Cities/ABC Chairman Thomas S. Murphy, who was involved directly in the negotiations. Murphy won't talk, but published reports indicate he's still smarting from an experience when he was on Texaco's board in 1985. A jury slapped Texaco with a $10.5 billion verdict in a suit by Pennzoil over a disputed merger.

Could ABC have prevailed in court?

For Philip Morris to win a libel suit, it had to prove two things: The ABC report was wrong, and the reporters acted with a reckless disregard for the truth or had doubts about the truth of the broadcast.

"In the dynamics of a libel trial," says Rod Smolla, a First Amendment and libel expert at the College of William and Mary, "ABC would argue..that still the story was substantially true. But that is a very difficult thing to do in front of a jury, particularly a jury in the heart of tobacco country [the trial was to be held in Richmond, Virginia]. And juries are notoriously unsympathetic to networks in libel trials."

In fact, the majority of media defendants lose when they go before a jury. But media defendants win more than half of their appeals, says Baron of the Libel Defense Resource Center. It is expensive, time-consuming and risky, however, for a news organization to go to trial, lose and appeal.

And ABC may have been vulnerable.

Philip Morris made it clear that part of its attack would focus on what it viewed as Bogdanich and Martin's flawed journalistic techniques. In legal papers, Philip Morris pointed to a Bogdanich memo, two depositions that it said contradicted on-air statements and what it called questionable editing practices.

Shortly before Bogdanich and Martin went to Winston-Salem to interview R.J. Reynolds officials, Bogdanich typed a memo briefing Martin on what to expect. Bogdanich wrote that RJR had reserved the right to end the interview if ABC asked questions other than those it had agreed to.

"We can only hope they terminate the interview," wrote Bogdanich in a February 18, 1994, memo. "We'll tape it."

Bogdan Prokopczyk of the American Health Foundation said on the program that he was surprised by the high nicotine level after testing cigarette filler provided by ABC. "The most likely explanation is that some nicotine has been added," Prokopczyk said on the broadcast.

But in a deposition, Prokopczyk said he later realized that the levels of nicotine he found in the reconstituted tobacco fell within the normal range, according to American Lawyer. In the deposition he answered both yes and no as to whether he later told Bogdanich this.

According to papers filed by ABC in connection with the lawsuit, Herman Van Nouhuys, whose company manufactures an ingredient used in tobacco flavor extracts, told the network he had made special orders of tobacco extracts for tobacco companies that include nicotine and flavors. But in a deposition, Van Nouhuys said he had never sold tobacco extract to any U.S. tobacco company.

Asked about these contradictions, Bogdanich says he would like to answer, but under the terms of the settlement he can't discuss the case. Nor can he speak about the outtakes from his interview with the mysterious "Deep Cough."

Deep Cough, whose voice and profile are disguised on air, is a former R.J. Reynolds manager who was instrumental in helping "Day One" show how tobacco companies allegedly manipulate nicotine levels. On the broadcast Deep Cough said tobacco companies precisely control how much nicotine is added back in the reconstitution process – that companies can make extracts with 1 percent, 5 percent or 50 percent nicotine.

On TV, when asked why tobacco companies would use a nicotine-rich syrup, Deep Cough replied, "They put nicotine in the form of tobacco extract into a product to keep the consumer happy."

In an interview with Bogdanich on January 27, 1994, the mysterious source said that the nicotine content for reconstituted tobacco could be varied and that the tobacco industry is "fearful that it could come under regulation because they're taking an extract, which is nicotine, and then reapplying it," according to outtakes.

But when asked repeatedly whether companies are "boosting" the nicotine level in cigarettes, Deep Cough says no, outtakes show. The source also answers no when asked whether manufacturers are putting nicotine in cigarettes to help keep smokers addicted (see "The 'Deep Cough' Outtakes," page 31).

These responses did not appear in "Smoke Screen."

Steven Brill, editor in chief of American Lawyer and founder of Court TV, is outraged by the Deep Cough transcript.

"ABC made a very clear mistake," says Brill. "They spiked the broadcast. They edited out of their outtakes the statement where the guy said: 'No, it's not spiking.' If someone did that here, they'd get fired." He added, "If you edit out a quote or change a quote that makes the opposite point you are trying to make, I think that's dishonest."

When ABC finally did apologize, it wasn't the mistake that got headlines. It was the phenomenon of ABC, journalistic giant, saying uncle to tobacco behemoth Philip Morris. Few newspapers printed the text of ABC's statement.

"Nobody as of now really understands what ABC apologized for," says Martin Schram, columnist and media critic for Scripps Howard. "My criticism was ABC allowed Philip Morris to take over. I think the communications company did a mighty poor job of communicating."

But in the end, despite the apology and the common view that Philip Morris had achieved a clearcut victory, "Smoke Screen" and a follow-up piece had a major impact. They made clear to the public that the tobacco industry routinely manipulates the amount of nicotine in cigarettes, fueling the drive to regulate the substance as a drug.

"The most important thing ABC did was place this issue at the top of the public health agenda, effectively transferring the dispute from the news media to the Clinton administration and the FDA," law professor Smolla says. "The broadcast had a very valuable impact."

It was enough to prod the FDA, even though the Coalition on Smoking OR Health had asked the government to regulate tobacco in 1988, according to antitobacco activist Douglas. The issue languished until "Day One" began its investigation. Three days before "Smoke Screen" aired, FDA Commissioner Dr. David Kessler released a letter saying the FDA would for the first time consider regulating tobacco products as drugs.

In August, President Clinton proposed a restrictive set of regulations on tobacco marketing and sales,which are going through the federal review process. Congress also has held hearings on tobacco. While both government branches were pursuing the subject prior to the "Day One" broadcasts, there is no doubt ABC drew broader national attention to the issue of cigarettes and health, say many.

In March 1994, the largest tobacco class action suit of its kind was filed in federal court in New Orleans against the tobacco industry. Those suing claim smoking is an addiction and that tobacco companies knew this and hid it from consumers. The "Day One" broadcast contention about tobacco companies using nicotine to hook consumers became part of the suit.

Douglas firmly believes none of this would have happened without the "Day One" broadcast.

And the committee that picked the segment as a Polk award winner felt its value was undiminished by the apology. Robert Spector, chairman of the Polk awards, says he isn't surprised ABC settled. "I didn't think it affected the quality of the broadcast," he says. "As a matter of fact, the same day the journalists [Bogdanich and Martin] signed long term contracts, which is kind of interesting. It says ABC found a convenient way out."

And Bogdanich says the settlement won't deter him or ABC from continuing to report on smoking.

"I haven't proposed any tobacco pieces because there are a whole bunch of other [non-tobacco stories] that got pushed back that I want to do," says Bogdanich, now with ABC's "20/20" ("Day One" was dropped in September, a victim of low ratings). "I don't see why there'd be any problem doing tobacco stories."

But there still may be a chilling effect. Andrew Tyndall, who keeps track of evening news broadcasts, notes that in the first half of 1994 – when the broadcast aired, Philip Morris filed suit and Congress held hearings – an average of 29 minutes a month were dedicated to smoking. For the following year, the number of minutes per month dropped to seven.

Another victim may be Martin Koughan, an Emmy Award-winning documentary maker. Koughan was commissioned by ABC's "Turning Point" to do an hour-long piece on how tobacco companies use marketing techniques that are forbidden in the U.S. to attract smokers abroad. Koughan says the piece, for which he was paid $420,000, had been approved by ABC's editorial department and vetted by the legal staff.

On March 24 1994, the day Philip Morris filed its suit, a "Turning Point" producer called Koughan and said he was going to have to rework the piece. It has never aired. ABCExecutive Vice President Paul Friedman has said the piece was "boring" and had nothing new in it; Koughan says Philip Morris has successfully intimidated the network.

"What the tobacco industry proved was for a paltry $10 or $20 million they can stop the criticism," says Koughan. "In fact, they did better than that." l

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